Statement of Changes in Equity

Statement of retained earnings is a part of Statement of changes in shareholders’ equity and includes:

Beginning balance of R.E

Plus or minus prior period adjustments –correction of errors (net of tax)

Plus Net income or minus net loss

Minus dividends declared or directly paid

Adjustments resulting from quasi-organization (if any)

Ending balance of R.E

The Statement of changes in shareholders’ equity typically includes the change in each item of shareholders’ equity during the period, starting with beginning balance of each item and ending with the balance of the equity item at the end of the period

Limitations of the statement of changes in shareholders’ equity

The biggest limitation of the statement of changes in shareholders’ equity is user ignorance. Since the statement of shareholders’ equity typically includes items of other comprehensive income, it is important that users examine the statement closely.